CHINA COKE WRAP: Offers diverge, trading thin

China’s coke export prices continued to weaken over the past fortnight, but the divergence between offers widened amid limited trading activity.

Metal Bulletin’s price assessment for Chinese coke exports with 65% coke strength after reaction (CSR), 12.5% ash, and in physical sizes of 30-90mm, was $340-350 per tonne fob China for the week ending Tuesday January 23.

This was down from $350-360 per tonne fob the preceding week, and $15-20 per tonne lower than $360-365 per tonne fob two weeks earlier

A deal for 50,000 tonnes of 65% CSR Chinese coke to be loaded late in February was heard traded to Europe at $360 per tonne cfr in the past two weeks – equivalent to about $340 per tonne fob China, given a freight rate of around $20 per tonne for such shipments, according to sources.

And some Chinese exporters were offering 65% CSR coke at $340 per tonne fob, while others were sticking to $350-360 per tonne fob.

The situation mirrors that between Chinese mills and coke suppliers, whereby the former have been squeezing raw materials costs given thinner steelmaking margins, while the latter have been resisting to stay profitable.

North China’s Hesteel cut its purchase price for metallurgical coke with 65% CSR delivered to its facilities by 100 yuan per tonne last Saturday, and has been paying 2,220 yuan ($347) per tonne since that day.

And east China’s Rizhao Iron & Steel lowered its purchase price for metallurgical coke by 100 yuan per tonne late last week.

These two price setters in the domestic coke market have both cut prices by 250 yuan per tonne so far this month, following hikes amounting to 570-750 yuan per tonne in December.

Although some other steelmakers were heard proposing further 100 yuan-per-tonne price cuts this week, cokeries have yet to accept those proposals.

“The downtrend in China’s domestic coke market is about over, with price cuts more difficult to realize because some coke suppliers are already near the break-even line,” a trader in Beijing told Metal Bulletin.

This is partly due to robust domestic coking coal prices, with mines lowering production rates or even shutting down in expectation of generally slower demand and to avoid accidents during the Chinese New Year holiday season.

The official holiday period this year is February 15-21, but influences on industrial and trading activities could linger for the rest of the month.

Metal Bulletin’s price assessment for Chinese hard coking coal produced in Shanxi province delivered to the steelmaking hub of Tangshan was 1,495-1,850 yuan per tonne for the week to Friday January 19.

The prices have stayed unchanged since late last month, after rising from 1,250-1,650 yuan per tonne at December start.

A swift depreciation in US dollar against the Chinese yuan has also supported export prices out of China.

Given the exchange rate of around 6.50 yuan to $1 two weeks ago, the current price of about 2,200 yuan per tonne for 65% CSR coke at Chinese ports would have been equivalent to $338.50 per tonne. However, the current rate of 6.40 yuan to $1 has pushed this up to $343.50 per tonne.

Such exchange rate volatility has also made Chinese exporters more cautious about taking orders, market participants said.

On the demand side, a buyer source from Southeast Asia said that they had no further appetite for metallurgical coke cargoes from China if offers are around $360 per tonne fob China.

“Apart from the fact that prices for coke imports from China are too high for us, we also have limited demand for imported cargoes as our blast furnace is going into maintenance,” he said, adding that they expect fob China offers to drop further in the coming weeks.

A source from India said that prices north of $350 per tonne fob China basis would not find any acceptance in the local market.

Indian users are mostly covered until March, but they may look to get some February-March shipments, a trader in Singapore told Metal Bulletin.

China produced 35.09 million tonnes of coke in December, down 7.1% on the year, according to the latest data from China’s National Bureau of Statistics. For the whole of 2017, output totalled 431.43 million tonnes, down 3.3%.

The country exported 1.04 million tonnes of coke, including semi coke, last month, up 15% year on year and 7.2% month on month, according to the Chinese customs data. Volumes totaled 8.09 million tonnes in 2017, down 20% from 2016.

Deepali Sharma in Singapore contributed to this article